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Kosztolányi was born in Szabadka, Austria-Hungary (today Subotica, Serbia) in 1885. The city serves as a model for the fictional town of Sárszeg, in which he set his novella Skylark as well as The Golden Kite. He is the child of Árpád Kosztolányi (1859-1926), physics and chemistry professor and headmaster of a school and Eulália Brenner (1866-1948) who was of French origin. He started high school in Szabadka but because of a conflict with his teacher he got expelled, and so he graduated as a private student in Szeged. Kosztolányi moved to Budapest in 1903 where studied at the University of Budapest, where he met the poets Mihály Babits and Gyula Juhász, and later for a short time in Vienna before quitting and becoming a journalist - a profession he continued for the rest of his life. In 1908, he replaced the poet Endre Ady, who had left for Paris, as a reporter for a Budapest daily. In 1910, his first volume of poems The Complaints of a Poor Little Child brought nationwide success and marked the beginning of a prolific period in which he published a book nearly every year. He met the actress Ilona Harmos in the winter of 1910. They got married on 8 May 1913. In 1936, he died from cancer of the palate.

The literary journal Nyugat (Hungarian for "West"), which played an invaluable role in the revitalization of Hungarian literature, was founded in 1908 and Kosztolányi was an early contributor, part of what is often called the "first Nyugat generation", publishing mainly in poetry.

Starting in the 1920s he wrote novels, short stories, and short prose works, including Nero, the Bloody Poet (to the German edition of which Thomas Mann wrote the introduction), Skylark, The Golden Kite, Kornél Esti and Anna Édes. In 1924 he published a volume of verse harkening back to his early work, entitled The Complaints of the Sad Man.